Post-Fed Analysis
So there was no rate increase. The stock market fluttered, went up, then went down, closing down 65. Bonds fluttered, then bobbed up and down, closing up around 1.5%. Gold fluttered, inched up from a negative position, then finished decidedly up for the day. And cash, as we painfully recounted yesterday, stayed where it's been since 2008: nowhere.
Can you make any sense out of all this? One trusted source predicted a short-term sharp rally if no increase. Didn't happen. One would normally guess that the gold market - seeing no increase in rates, implying inflation's not only weak, but continuing to wear it's deflation dress - would drop, maybe even a lot. Accepted wisdom has gold jumping to the tune of rate increases, drooping when the "D" word (deflation) echoes through hill and dale.
As for bonds, yesterday's script got a bit muddled. You see, the Fed put forth their ongoing theory that the economy was gaining strength - just not at the rate one might hope. And at such a hopeless, er, less than ideal rate, raising rates wasn't optional, was premature. But, really, the economy was still going, well, not gangbusters, but slightly less than robustly...or something like that. So the script, which unsuccessfully pushed its upbeat view of the U.S. economy, should have included a direction for bonds decidedly down, i.e., with interest rates naturally rising in anticipation of a hotter economic climate. But having not stepped up to the rate plate by raising the Fed funds rate, the bond market - a relatively smart and sophisticated segment of the financial markets - took their cue from reality rather then the Fed script and concluded that the economy doesn't look so great after all. And so rates dropped after that initial fluttering and bobbing, thereby pushing the price of bonds up, thereby pushing the price of the 30-year bond up a good chunk.
Lurking behind the scenes, we have observed one segment of our disordered economy and financial system that may be stirring, ready to make a splash: mining stocks, specifically precious metals mining stocks. These dogs, languishing month after month lo these last four years or so, may be doing more than threatening to finally pick up and run. Now we wouldn't bet the ranch on this. And with a gun at our head we'd likely back off on any prediction. But it's worth checking out and maybe monitoring these dogs. You never know.
Speaking of scripts, we hope you followed the script we laid out yesterday and cooled your jets. You'd have avoided the anxiety and strength-sucking drama of waiting for the Fed announcement, listening to the pre and post announcement blather, and hovering over your screens to observe the various markets' reactions to the BIG news. Instead you went about your business and finished your day just about where you might have anticipated given your properly balanced, rightly aligned investments. Or something like that.
In any case, you're ready to face the coming "interesting times," right?
Can you make any sense out of all this? One trusted source predicted a short-term sharp rally if no increase. Didn't happen. One would normally guess that the gold market - seeing no increase in rates, implying inflation's not only weak, but continuing to wear it's deflation dress - would drop, maybe even a lot. Accepted wisdom has gold jumping to the tune of rate increases, drooping when the "D" word (deflation) echoes through hill and dale.
As for bonds, yesterday's script got a bit muddled. You see, the Fed put forth their ongoing theory that the economy was gaining strength - just not at the rate one might hope. And at such a hopeless, er, less than ideal rate, raising rates wasn't optional, was premature. But, really, the economy was still going, well, not gangbusters, but slightly less than robustly...or something like that. So the script, which unsuccessfully pushed its upbeat view of the U.S. economy, should have included a direction for bonds decidedly down, i.e., with interest rates naturally rising in anticipation of a hotter economic climate. But having not stepped up to the rate plate by raising the Fed funds rate, the bond market - a relatively smart and sophisticated segment of the financial markets - took their cue from reality rather then the Fed script and concluded that the economy doesn't look so great after all. And so rates dropped after that initial fluttering and bobbing, thereby pushing the price of bonds up, thereby pushing the price of the 30-year bond up a good chunk.
Lurking behind the scenes, we have observed one segment of our disordered economy and financial system that may be stirring, ready to make a splash: mining stocks, specifically precious metals mining stocks. These dogs, languishing month after month lo these last four years or so, may be doing more than threatening to finally pick up and run. Now we wouldn't bet the ranch on this. And with a gun at our head we'd likely back off on any prediction. But it's worth checking out and maybe monitoring these dogs. You never know.
Speaking of scripts, we hope you followed the script we laid out yesterday and cooled your jets. You'd have avoided the anxiety and strength-sucking drama of waiting for the Fed announcement, listening to the pre and post announcement blather, and hovering over your screens to observe the various markets' reactions to the BIG news. Instead you went about your business and finished your day just about where you might have anticipated given your properly balanced, rightly aligned investments. Or something like that.
In any case, you're ready to face the coming "interesting times," right?
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